On a typical metro Atlanta loan of $150,000, your payment at the 30-year term would be about $866, while your 15-year payoff would call for almost $1,184 monthly. Yes, you save a lot in interest, but the higher monthly total may not be affordable.
But there’s another choice available. One that might get the rate you want and at the same time make your payment even more attractive.
It’s called the 5/1 adjustable program. The interest rate is set at 5.03 percent, and the term of the loan is a full 30 years, making your initial monthly payments a low $808. But there’s just one catch.
The initial rate of 5.03 percent ends after five years, and the loan converts to a one-year adjustable program. Your payment then goes up or down depending on changes in the interest-rate market. And of course, no one can know where rates will be in five years.
The 5/1 ARM is a perfect choice if you are relatively sure you will be moving in five years or less, but it becomes less attractive as time wears on.
If you want to get the best interest rate coupled with the peace of mind a fixed-rate loan brings, you’ll still have to make the big monthly payment. If you can afford the monthly total, go with the 15-year fixed rate.
John Adams is a broker and investor. He answers real estate questions on radio station WGKA (920 am) at noon every Saturday. For more real estate information or to make a comment, visit www.money99.com.